Shelter Partnership Inc

INTRODUCTION   About Shelter Partnership, Inc   The case is about cost allocation accounting concerns in a non-profit corporation “Shelter Partnership, Inc”. The following summaries the key activities undertaken by Shelter and the way these different activities contribute towards the achievement of Shelter’s objective.   Approach   Before we dive into the case analysis, we would like to first discuss the relevant topic, which we see as the issue of cost accounting in a non-profit organization (“NPO”), to lay the foundation for the analysis of the case subsequently.   (A) DISCUSSION OF THE RELEVANT TOPIC – A LITERATURE REVIEW   It would be appropriate to develop some background knowledge about the limitation of financial statements of NPOs, support cost, allocation of cost and its importance.   (I) Limitation of Financial statements of the nonprofit organizations:   Subjectivity in Interpretation of the Financial Statements of the nonprofit organizations.   It is important to remember that financial information for nonprofits is interpreted differently from for-profit financial statements. The following is quoted from What a Difference Nonprofits Make: A Guide to Accounting Procedures, 1990, Accountants for the Public Interest:   “ Meaningful evaluations and comparisons of nonprofit performance almost always prove difficult and complex. While the profitability of two businesses can easily be calculated, it is much harder to compare the effectiveness of two counseling centers to see which is doing a better job of helping the mentally ill. Without the standard of profitability, it is also difficult to compare the job performance of nonprofit staff and managers.

Since the beneficiaries of nonprofits often cannot afford to pay for services, organizations frequently lose money on every sale. As a result, an increase in the number of clients or customers may paradoxically increase the likelihood of a financial crisis. On the other hand, turning a profit may mean that a... [continues]

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